Productivity Growth in `High-Tech' Manufacturing Industries: Among Manufacturing Industries Employing a Substantial Proportion of Research and Development and Technology-Oriented Workers, the Information Technology Industries Exhibited Particularly Strong Productivity Growth over the 1987-99 Period. (High-Tech Industries).(Statistical Data Included)
Kask, Christopher, Sieber, Edward, Monthly Labor Review
It is widely accepted that the high-technology sector is one of the most dynamic parts of the U.S. economy. High-tech industries are thought of as an important source of employment growth, profits, and innovation in products and production processes. Accordingly, the high-tech sector has been a center of interest, generating numerous analyses and studies. In a 1997 Monthly Labor Review study, for example, William Luker, Jr., and Donald Lyons stated that "the continuing attention paid to high-tech industries in recent years seems to be rooted in the widespread belief that the innovations they produce can profoundly alter an economy's mix of firms, industries, and jobs." (1)
The high-tech manufacturing sector, under alternative definitions, has dominated other manufacturing industries with respect to productivity growth. Between 1987 and 1999, labor productivity--defined as output per hour of labor input--increased 9.5 percent per year in high-tech manufacturing industries. (2) Over the same period, labor productivity in the manufacturing sector as a whole increased 3.2 percent per year. Chart 1 illustrates the dramatic difference between these two growth rates.
Labor productivity relates output to the labor resources used in its production. It is an indicator of the efficiency with which labor is being utilized. (3) High-tech manufacturing's strong performance seems consistent with expectations, but the situation deserves a closer look. Are all the industries in the high-tech sector recording rapid efficiency gains as measured by growth in labor productivity? Would the high-tech efficiency advantage be as large if inputs into the production process other than labor were accounted for? What is happening to costs in the high-tech sector?
This article builds upon earlier BLS work and identifies a set of detailed industries as representing the high-tech manufacturing sector. Productivity developments in these industries were examined, and a set of aggregate measures were developed that permit comparison of the high-tech manufacturing sector with manufacturing as a whole. In addition to labor productivity and related measures such as output, labor hours, employee compensation, and unit labor costs, the analysis includes multifactor productivity, a measure of economic efficiency that relates output to combined inputs of labor hours, capital services, and intermediate purchases.
Economic growth can occur from increases in inputs or from advances in productivity. Increases in inputs impose costs on society, such as less leisure time, reduced current consumption, and depletion of resources. Multifactor productivity growth measures changes in output that are not attributed to the changes in combined inputs. While measures of labor productivity provide valuable insights into efficiency, measures of multifactor productivity are more useful in this regard. By accounting for sources of growth from additional inputs--specifically, capital and intermediate purchases--multifactor productivity analysis more closely measures changes in efficiency. (4)
Data sources and limitations
The data used for this analysis are produced by the Office of Productivity and Technology. The analysis of high-tech manufacturing is based on data for industries classified at the three-digit level in the 1987 U.S. Standard Industrial Classification (sic) system. (5) This data set includes labor productivity and related measures for three- and four-digit SIC industries for the period from 1987 through 1999. For the 140 three-digit sic manufacturing industries considered here, multifactor productivity and related series are also available for the 1987-99 period. (6)
Data for the manufacturing sector as a whole are from the BLS series on productivity in major sectors of the U.S. economy. This data set contains indexes of labor productivity and related measures for the private business, private nonfarm business, and manufacturing sectors for the 1949-2001 period. …